After Denying Debtor’s Motion for Sanctions Where Creditor Sold Debtor’s Property at Auction Days After Petition Date, Judge Offers “Best Practices” Advice to Counsel

After Denying Debtor’s Motion for Sanctions Where Creditor Sold Debtor’s Property at Auction Days After Petition Date, Judge Offers “Best Practices” Advice to Counsel

 In this Chapter 7 case, the Debtor seeks damages after a creditor sold the contents of the Debtor’s leased storage unit in an online sale shortly after the Debtor filed forbankruptcy.

On December 2, 2016, the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On February 26, 2017, the Debtor filed a Motion for Sanctions for Violation of the Automatic Stay  alleging that “Self Storage” willfully violated the automatic stay by selling the Debtor’s property stored at its facility. Self Storage did not respond to the motion, nor did anyone representing it attend the hearing scheduled for March 21, 2017. At the hearing, the Court asked the Debtor to file a declaration documenting the amount of her damages, which the Debtor filed on March 30, 2017. On March 31, 2017, Attorney  Levinson filed a notice of appearance on behalf of Self Storage. On April 2, 2017,  Self Storage filed an objection to the Debtor’s declaration.  In its objection,  Self Storage conceded that it sold the Debtor’s belongings on December 6, 2017, but claimed that it sent prior notice to the Debtor of the date of the sale and did not receive notice of the Debtor’s pending bankruptcy case until December 8, 2016.

As of the Petition Date the Debtor was more than 45 days delinquent in the required payments due to Self Storage under the Contract.

By an online auction sale, which closed on December 6, 2016 (4 days post-petition), Self Storage sold the Contents to a winning bidder for an auction sale price of $10.00 (the “Sale”).

After the Debtor filed her bankruptcy and after the conclusion of the Sale,  Self Storage and or its statutory agents received from Debtor’s attorney, letters informing  Self Storage of Debtor’s bankruptcy, their violation of the stay, and a request to either return Debtor’s property or its value.

On February 3, 2017, Self Storage, through an email  sent to Debtor’s counsel admitted they sold the contents of the Debtor’s storage locker postpetition and stating that  Self Storage would not reimburse the Debtor.

As of today,  Self Storage has not returned debtor’s property or their value, although  Self Storage has offered to pay the Debtor ten times the value of the Contents as determined though the Sale, and the Debtor has refused that offer.

The site manager at Self Storage  testified that on October 24, 2016, he sent a letter to the Debtor at her present address that included a sale date for the contents of the storage unit.

The site manager testified credibly that the letter specified a sale date of December 6, 2016. The Debtor was not able to bring her rent payments current, so at the time of the bankruptcy,  Self Storage still had possession of the Debtor’s belongings as a part of the lien it held against the Debtor’s property in the leased storage unit.

The Debtor filed for bankruptcy at approximately noon on Friday, December 2, 2016. The Debtor testified that she called Self Storage on December 5, 2016, the day before the sale was to take place, but admitted that she did not mention her bankruptcy proceedings. This conflicts with the Debtor’s declarations under penalty of perjury, wherein the debtor states that on December 5, 2016, she “left a voicemail notifying Self Storage that she had filed bankruptcy.” However, the Court finds that the Debtor’s testimony at trial is more credible. Her trial testimony is also consistent with the site manager’s testimony that  Self Storage received no phone messages from the Debtor or other notice of her bankruptcy filing prior to the sale date of December 6, 2016. The site manager testified credibly that when the storage facility received notice of a bankruptcy, he was to stop all collection proceedings against the occupant, including the sale of any property located in the occupant’s storage unit.

On Tuesday, December 6, 2016, at 11:00 A.M., Self Storage sold the Debtor’s personal property within her storage unit in an online auction. At the time of the sale, Self Storage did not have any notice of the Debtor’s bankruptcy case. The terms of the sale provided for the winning bidder to pick up the items from the storage unit within 72 hours.  Self Storage retained the right to cancel the sale at any point, up until the time that the winning bidder picked up the items it had purchased. If the buyer did not pick up the belongings until the last possible date, Self Storage would have until December 9, 2016, at 11:00 A.M. to cancel the sale. However, the site manager testified that winners of the online auctions generally pick up their belongings the same day or the next day. The site manager stated that the winner of this auction, Jon McFadden, was a regular bidder who generally came the same day or the next day to pick up the items he had purchased at auction. Under the presumption of regularity, the Court finds that it is more likely than not that the purchaser picked up the items from the Debtor’s storage unit and the sale was completed before December 8, 2016.

Two days after the online auction, on December 8, 2016, the Debtor’s attorney called  Self Storage and informed it of the Debtor’s bankruptcy.

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